Utility Week

UTILITY Week 18th December

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Finance & Investment This week Networks can avoid storm repair costs PwC says DNOs should be able to claim repair and compensation costs in wake of Desmond Distribution Network Operators (DNO) should be able to avoid bearing the brunt of the cost of storm Desmond, according to PwC. PwC's general insurance leader Mohammad Khan said DNOs should be able to claim repair and compensation costs, which would otherwise be borne by shareholders, through their business interruption insurance cover. DNOs affected by the storm have yet to fully deter- mine both the costs of repair work incurred and the likely bill for compensation pay-outs. Scottish Power Energy Networks said about 800 customers are eligible for compensation aer experiencing supply interrup- tions exceeding 12 hours. Each customer is eligible for at least a £75 pay-out from the company, putting the total compensation bill at about £60,000. A total of 16,500 experienced "some form of interrup- tion" due to the extreme weather. More than 50,000 customers in the northwest lost power aer the main substation in Lancaster flooded, in spite a £13 million investment in flood defences since 2007 at 51 key sites, including the affected substation. Customers in Lancaster were reconnected by Electric- ity North West (ENW) on Tuesday and 1,000 customers in Cumbria were without power for more than six days. Ofgem said customers are entitled to compensation when their supply has been interrupted for 48 hours continuously, but this only takes effect aer it is "reason- ably practicable" for the DNO to make repairs. LD ENERGY Centrica on track to hit profit forecast Centrica expects its full-year earnings to be in line with expectations while pushing ahead with its new strategic vision despite a weaker perfor- mance from supplier British Gas. British Gas residential profit margins are expected to be "materially lower" in the second half aer it offered customers a second tariff cut this year. Also, its business energy supply unit is expected to report an operat- ing loss aer new IT systems caused billing problems. However, Centrica said the group "remains on track" to deliver over £2 billion in 2015 in the company's adjusted operat- ing cash flow. In July the company con- cluded a six-month strategy review and it plans to invest £1.5 billion in its customer-fac- ing businesses over the next five years through a focus on energy supply, services, distributed energy and power, the con- nected home and energy trading. PAN-UTILITY Utilities plan £10bn investment in north Utility companies will invest £10 billion more in the north of the UK over the next five years through a collective investment of £2 billion a year in the area. The investment is being made by Infrastructure North, com- prising: Northern Gas Networks, Northern Powergrid, Yorkshire Water and Northumbrian Water. According to a report from Edge Analytics, for every £1 the four companies collectively spend, an extra spend of 87 pence is created. ELECTRICITY Solar cuts add 30% to costs, MPs told The government's sudden cuts to solar support have caused asset costs to spike by 30 per cent, delaying the technology's bid to reach grid parity, a solar investor has warned MPs. Next Energy Capital manag- ing director Abid Kazim told the Energy and Climate Change Committee that investors need "clarity, continuity and consist- ency" to avoid changes that can add "10, 20, 30 per cent, in extreme cases, to the cost of an asset" and "will impact the consumer's pocket". He told MPs that two weeks before the government proposed to close the Renewable Obliga- tion regime to projects over 5MW from 1 April 2015 his fund was considering a project with costs of £80,000-120,000/MWh. But aer the announcement the developer's costs spiralled to £200,000-300,000/MWh because the developer "was facing bank- ruptcy", Kazim said. Water damage: flooding was extensive UTILITY WEEK | 18TH - 24TH DECEMBER 2015 | 19 Stock watch 215 210 205 200 CENTRICA SHARE PRICE, 6 - 10 DECEMBER 7 Dec 8 Dec 9 Dec 10 Dec 300 280 260 240 220 200 CENTRICA SHARE PRICE, DECEMBER 2014 - DECEMBER 2015 Jan Mar May Jul Sept Nov Centrica's share price rose almost 4 per cent aer the British Gas parent company said it remains on track to meet its full year earnings in its Thursday 10 December trading update. Shares rose from 206.30 on Wednesday to highs of 214.20 pence by Thursday mid- morning before easing back by midday. Shares were nonetheless 28 per cent lower than 2015 highs in early February at 296.40 pence, and 23 per cent lower than on the same day last year.

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